Securities & Exchange Commission: A Quick Guide
The Securities & Exchange Commission (SEC) is a regulatory body that monitors and oversees transactions that occur within the financial sector. It exists to prevent fraudulent activities, and to restore and preserve the faith that investors have in the financial market. The Securities & Exchange Commission (SEC) is a regulatory body that monitors and oversees transactions that occur within the financial sector. It exists to prevent fraudulent activities, and to restore and preserve the faith that investors have in the financial market.
Brief History of the SEC The Securities & Exchange Commission was created as a direct result of the stock market crash in 1929. The SEC was formed by two proposals that Congress made in the years following the stock market crash: the Securities Act of 1933 and the Securities Exchange Act of 1934. While there were a number of causes for the stock market crash of 1929, the most glaring were the unchecked amount of borrowing lenders allowed borrowers to perform and the over-exuberance of investors in the stock market. Entire families were so reliant upon their securities growing that they lost everything when the stock market inevitably crashed. The idea of stock market investors jumping from tall buildings during the crash summarizes just how much faith and risk the stock market represented before the SEC was formed.
The General Purpose of the SEC While there are numerous goals that each division of the SEC has, the overall purpose of the SEC is to provide security to investors as a whole. This prevents disasters like the stock market crash of 1929 and the Great Depression from recurring when the market makes its natural cyclic fluctuations.
About Each Division of the SEC As mentioned earlier, each division of the SEC has a different purpose. The Division of Corporate Finance regulates the documentation and information that companies release for investors to see. This creates a more transparent market where investors can make sound purchasing decisions without being lured by false information. The Division of Market Regulation oversees how much money can be invested in stocks and where the money can come from. They set the rules for investment and keep the stock exchanges running orderly to minimize delays.
The Division of Investment Management oversees the rules pertaining to how investments can be made. They create the rules for financial advisers to follow, which in turn prevents fraudulent activities from occurring on an individual basis. The Division of Enforcement acts much like the Executive Branch of the American government. It conducts investigations into inquiries of investors conduct. If they find that fraudulent activities have occurred, they gather evidence and forward it to the courts so that the offending parties can be prosecuted.
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